To directly invest in cryptocurrencies, you need to open an account with a crypto exchange and have a crypto wallet to store your cryptocurrencies. However, the process is not smooth, as most of the top banks, such as ICICI Bank, do not allow fund transfer to crypto exchanges. Also, with instances of crypto exchanges being hacked, safety is always a concern. Finally, the new crypto tax introduced in Budget 2022, has made crypto investment less appealing for Indian investors. Not only do you have to pay a 30% tax on any gains made (which cannot be used to offset losses from other crypto transactions), there is also a 1% TDS on each transaction. While the 30% tax on profits has come into effect from April 1, 2022, the 1% TDS on each transaction comes into effect from July 1, 2022.
However, the interesting thing is that you do not need to directly buy cryptocurrencies to invest in cryptocurrencies. There are products available in the US markets that let you invest in cryptocurrencies in an indirect manner. They allow you to invest in cryptocurrencies without the hassles that come with buying cryptocurrencies directly. Read more about Cryptocurrency.
Now, Indian investors will have more options to invest in cryptocurrencies through the Vested platform via Grayscale Crypto securities available in the US. To invest, you need to be a Vested premium subscriber.
Benefits of investing in cryptocurrency through this route
There are a couple of potential benefits if you choose to invest in cryptocurrency via Grayscale securities.
When you invest in cryptocurrency, through any of the Grayscale securities, you can get exposure to the respective coins (or a basket of coins) indirectly without having to go through the hassles of directly buying these coins and having to store and safeguard them. Instead, you buy a security that tracks the price of a particular cryptocurrency (or cryptocurrencies) and benefit from its price movements.
Also, if you live in India, this is a more tax-efficient way to invest in cryptocurrencies. When investing in cryptocurrency through Grayscale securities, you do not have to pay 30% tax on your profits and 1% TDS on every transaction. Instead, for short-term capital gains you would be taxed according to your tax slab. For long-term capital gains (for investments held for over 36 months), you will be taxed at 20% with indexation benefits. In this blog, we will take a look at the Grayscale securities that you can invest in through the Vested platform.
Grayscale Bitcoin Trust (GBTC): It is the largest publicly traded Bitcoin fund in the world. It is a closed-end fund that aims to track the price movement of Bitcoin. The shares of the Trust track the Bitcoin market price less fees and expenses. GBTC is the most popular among Grayscale securities and had assets under management (AUM) of $24.9 billion as of April 27, 2022.
Grayscale Ethereum Trust (ETHE): It is a closed-end fund that aims to track the price movement of Ethereum. The shares of the Trust track the Ethereum market price less fees and expenses. As of April 27, 2022, it had $8.8 billion as AUM.
Grayscale Litecoin Trust (LTCN): It is a closed-end fund that aims to track the price movement of Litecoin. The shares of the Trust track the Litecoin market price less fees and expenses. It had an AUM of $154.6 million as of April 27 2022.
Grayscale Ethereum Classic Trust (ETCG): It is a closed-end fund that aims to track the price movement of Ethereum Classic. The shares of the Trust track the Ethereum Classic market price less fees and expenses.. As on April 27, 2022, it had an AUM of $371.2 million.
Grayscale Bitcoin Cash Trust (BCHG): It is a closed-end fund that aims to track the price movement of Bitcoin Cash. The shares of the Trust track the Bitcoin Cash market price less fees and expenses. It had assets under management of $95.4 million as of April 27, 2022.
Refer to the figure below to get an understanding of how the above Grayscale trusts have performed in comparison to the respective cryptocurrency it tracks.
Grayscale Digital Large Cap Fund: (GDLC): You may invest in Bitcoin and Ethereum and the other cryptocurrencies individually through the above-mentioned trusts, but if you want to invest in a basket of large-cap digital assets in the form of a security, the Grayscale Digital Large Cap Fund may be an option. Not surprisingly, it is Bitcoin and Ethereum heavy, with Bitcoin and Ethereum making up 61.43% and 28.47% of the fund respectively as on April 27, 2022. It also has minor portions of Litecoin, Solana, Cardano, Avalanche, and other coins. The GDLC had an AUM of $396.1 million as of April 28, 2022.
Keep in mind
Note that investing in these securities is a high-risk endeavor. The volatility of the underlying digital assets is high. Furthermore, Grayscale Securities have so far been unable to achieve its investment objective. There are significant tracking errors between the share price and the value of the underlying digital assets. Also, it is important to be aware of the associated fees before you invest. It is recommended that you understand the risks involved and invest according to your risk appetite.